A brief disclaimer before I get into this: what follows is based on two news reports – one from XYZ’s Poland Unpacked newsletter and one from MILMAG – covering the launch of Poland’s “Local Content: For the Benefit of Poland” initiative on 9 April 2026. If the statements attributed to Prime Minister Donald Tusk and Minister of State Assets Wojciech Balczun are accurately reported, then what has been unveiled is a legally indefensible undermining of the EU internal market.

Local content requirements (LCRs) are policies with a long history and a poor track record. In the context of public procurement, they represent measures designed to give preferential treatment to domestic economic operators, goods, services, and workers when compared to those from other countries. The economic literature on their effects is unambiguous: LCRs are economically inefficient, often counterproductive, and tend to generate long-lasting market distortions that are difficult to reverse. I have written about this in detail in a recently published working paper.

And yet they keep coming back. The current geopolitical moment – the Russian agression in Ukraine, supply chain anxieties, the Trump administration’s revival of “Buy American” rhetoric – has given LCR proponents a new vocabulary: supply chain security, strategic autonomy: economic sovereignty. These are legitimate concerns, but they do not transform an illegal intra-EU policy into a legal one.

The most important conceptual error underlying Poland’s initiative – and one that keeps appearing in public discourse with remarkable persistence – is the conflation of two fundamentally different legal situations: the treatment of third-country economic operators, and the treatment of economic operators from other EU Member States.

Third-country economic operators come from countries that have no free trade agreement with reciprocal public procurement provisions in place with the EU and are not parties to the WTO GPA. They operate outside the framework of EU internal market law. The CJEU, in Kolin (C-652/22) and Qingdao (C-266/22), confirmed that their participation in EU public procurement procedures falls within the exclusive external competence of the Union, and that – pending EU-level legislation – contracting authorities enjoy broad discretion to exclude them or subject them to differential treatment.

Economic operators from other EU Member States are in an entirely different position. They are participants in the internal market. They benefit from – and are protected by – the Treaty on the Functioning of the European Union, the Treaty on European Union, and decades of CJEU case-law. The internal market is, to quote Article 3(3) TEU, one of the EU’s foundational objectives. Articles 34 and 56 TFEU prohibit restrictions on the free movement of goods and services between Member States. Article 49 TFEU protects freedom of establishment. These are binding legal obligations that Member States have assumed as a condition of EU membership.

And it is worth being clear that extra-EU LCRs – measures giving preference to EU economic operators, goods, and services over those from third countries without FTAs or GPA coverage – are not only legally permissible but potentially valuable instruments of EU strategic policy. They do not fragment the internal market because they do not discriminate between Member States: a Polish, Croatian, or German company is treated identically under an extra-EU LCR regime. At the same time, properly designed extra-EU LCRs can address legitimate strategic objectives shared by all Member States – supply chain security, reduced dependence on state-subsidised third-country producers, the preservation of critical industrial capacities in defence, energy, and technology. The economic case for such measures is not straightforward, and the literature on their efficiency is mixed at best. But their strategic rationale is coherent, their legal basis under Articles 3 and 207 TFEU and Articles 25 of Directive 2014/24/EU and 43 of Directive 2014/25/EU is established, and their application, when designed with care and respect for GPA and FTA obligations, does not come at the cost of the principles that make the EU what it is.

When Prime Minister Tusk’s government develops scoring criteria to measure the “Polishness” of an entity – weighted by where its beneficial owner is headquartered, where it employs workers, where it pays taxes, and where it is registered – and then applies those criteria in the evaluation of public procurement tenders, what it is constructing is a intra-EU LCR. The CJEU rejected precisely this kind of approach in Commission v Denmark (C-243/89), in Contse (C-234/03), in Rush Portuguesa (C-113/89), and in Rüffert (C-346/06). This is settled law with practically no room for different interpretation.

What makes Poland’s initiative particularly troubling is not merely its illegality, but the rhetorical strategy used to promote it. According to the XYZ report, Prime Minister Tusk stated the following at the launch event: “A politician who promotes foreign production at the expense of domestic industry is not a patriot – and that does happen.”

The implication is clear: if a contracting authority selects a German, Czech, or Croatian company over a Polish one – perhaps because it submitted the best tender – the official responsible is guilty of a failure of patriotism.

And the targets of this pressure are not only contracting authorities aligned with the ruling coalition. Prime Minister Tusk was explicit that the central government “has no direct influence over the decisions” of local governments, but announced that a ranking of local governments would be created to assess who is implementing the local content agenda. This means that local governments – often governed by parties other than those in the national coalition – risk being publicly stigmatised for failing to comply with a policy that has no statutory basis and is contrary to EU law.

The threat does not stop at political embarrassment. According to the XYZ report, Prime Minister Tusk stated: “It cannot be the case that EU funds flow to municipalities that do not respect this principle.”

This deserves to be read very carefully. The Polish government is conditioning access to EU funds on compliance with a procurement preference policy that is contrary to EU law. EU funds are disbursed under rules that require equal access for economic operators from all Member States and compliance with the public procurement directives. Using those same funds as a lever to enforce a regime of domestic preference is paradoxical.

The government itself acknowledges the legal problem. The XYZ article is explicit: “There will be no hard statutory requirements mandating the selection of domestic suppliers whenever possible. The option of introducing such rules is constrained, among other things, by EU law, which guarantees all EU companies equal access to the market. Instead, the government is opting for policies and guidelines.”

This acknowledgment makes the EU funds threat all the more remarkable. The government knows it cannot legislate what it wants, so it has chosen a different mechanism: use public funds and reputational pressure to achieve the same result. A “nonobligatory guidance” backed by the threat of withheld EU transfers is in fact a mandatory policy that cannot be called mandatory because its authors understand it would be immediately unlawful if enacted as law.

That this still needs to be explained, after more than seven decades of European integration, is genuinely difficult to comprehend.

Minister Balczun described Poland’s local content policy as one that “is in line with European regulations and can serve as a model for the entire EU.” Let us take that ambition seriously for a moment and consider what it would mean if other Member States adopted the same approach.

If every Member State implemented an intra-EU LCR regime of this kind, the consequences for the internal market would be severe. Cross-border procurement in the EU is already, by the Commission’s own data, remarkably limited: direct cross-border awards represent around 2% of contract numbers and 4% of awarded value. The internal market in public procurement is more theoretical than real for many economic operators. Intra-EU LCRs would reinforce and legitimize this fragmentation, converting what is currently a problem of practice into a problem of policy.

If Poland closes its public procurement market to economic operators from other Member States while those Member States keep their markets open to Polish companies, Polish firms continue to benefit from the internal market while Polish contracting authorities are insulated from European competition. The “model” that Minister Balczun proposes for the rest of the EU (”every Member State should implement national LCRs”) is, in its logical endpoint, the unraveling of the (public procurement) common market one LCR measure at a time.

I want to be precise about the legal position, because it sometimes gets obscured by the complexity of the arguments on either side. The question of whether intra-EU LCRs are compatible with EU law is not an open one. The TEU and TFEU prohibit measures that impede the free movement of goods and services between Member States and that give preferential treatment to domestic economic inputs at the expense of those from other Member States. The CJEU has applied this principle consistently in the public procurement context for three decades. Even where the Court has articulated criteria under which LCRs might theoretically be justified – non-discrimination, imperative requirements in the general interest, proportionality – it has done so in terms so demanding that they offer no practical opening.

Poland is the EU’s sixth-largest economy. That it has chosen to frame a policy of domestic preference as both legally sound and a model for others is not a small matter. The internal market exists because Member States agreed that their long-term interest – economic, political, and strategic – is better served by open borders than by national procurement champions. Geopolitical anxiety does not alter the legal framework, and it does not change the economics: protecting domestic producers from intra-EU competition does not make them more capable of competing in global markets or in the defense sector.

LCRs keep coming back because they are politically attractive. They tell a simple story about sovereignty, jobs, and national identity. The law, the economics, and the logic of European integration all point in the other direction – but those are complicated stories. That is why this debate will not end with Poland’s initiative, and it is why it needs to be addressed directly, clearly, and without diplomatic speak every time it resurfaces.

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